Markets End Week With a Losing Streak Intact

Investors drove American stock indexes to their worst weekly performance of the year after excitement about Facebook’s stock offering failed to chase away the pessimism that has increasingly gripped investors in recent weeks.

Friday’s declines sealed the first string of three down weeks since the dark days of last summer when markets took a dive on the twin concerns of the European debt crisis and the prospect of a double-dip recession in the United States.

While those fears faded early this year, they were revived after Greek elections pushed the country toward leaving the euro currency and threatened to pull down the European banking system. More recently, several economic releases have suggested that growth in the United States and China may be weakening.

The yields on Treasury bonds, which go down when investors are looking for a haven, have fallen even lower than they did last summer, sinking to levels that many analysts thought were unlikely.

“We’re on storm watch for the summer of 2012,” said Jack Malvey, the chief global market strategist at BNY Mellon.

The Standard & Poor’s 500-stock index was down 4.3 percent for the week and 0.7 percent on Friday to close at 1,295.22. That takes the index back to where it was in mid-January. The Dow Jones industrial average lost 0.6 percent, or 73.11 points, to 12,369.38.

The interest rate on the 10-year Treasury bond ended the week at 1.72, hovering around the lowest level in decades.

Around the world, Switzerland, Australia and Mexico joined the list of countries where stocks have erased all of their gains since the beginning of the year.

This is the third year in a row that markets have headed south in the spring. In the last two years the markets eventually recovered, but only after months in the red. The S.& P. 500 had risen nearly 12 percent earlier this year, but now stands up just 3 percent.

Facebook’s initial public offering was supposed to help lift some of the gloom that settled over the stock markets. In the hours before its debut, technology stocks saw gains.

But as the I.P.O. stalled and ended the regular-trading day essentially flat at $38.23, it brought other hot technology stocks down with it. The Nasdaq composite index ended the day down 1.2 percent and fell 5.3 percent this week, to 2,778.79. The frantic trading in Facebook shares did push up the volume of trading on the nation’s exchanges. But one-day spikes are not expected to erase the trend of shrinking trading volumes as investors seek refuge in less risky assets like bonds.

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Sectors of the economy that rely on global exports, like energy and materials, have been heading down for weeks. But recently sectors that are focused more on the United States economy, like consumer staples and utilities, have also suffered.

The biggest sign of the potential problems for the economy came on Thursday when the Federal Reserve Bank of Philadelphia reported that its monthly business outlook survey for the Middle Atlantic region unexpectedly turned negative in May. That confirmed fears raised by recent government data suggesting that companies had slowed their hiring.

“We’ve seen some softer data,” said Michelle Girard, the senior United States economist at RBS. “It has led to some disappointment for those who had hoped we were on to something more.”

Financial stocks fell more sharply than any other sector in the S.& P. 500 this week after JPMorgan disclosed late last Friday that it suffered billions dollars in unexpected trading losses on a corporate trading desk. The bank ended the week down 9.4 percent. Finance industry professionals worry that the incident could lead banks to cut back on some types of riskier lending, which could in turn dampen the economy.

Looking forward, market strategists and traders have also been increasingly focused on the possibility that United States politicians could, as they did last year, fall into paralyzing debate over tax increases and the federal debt.

The economic picture has by no means totally soured. This week brought the latest batch of data suggesting that the housing industry, including residential real estate prices, might have finally begun a slow improvement.

More important, any further weakening of the economic picture could provoke the Federal Reserve to embark on another round of asset purchases like the ones that helped bolster the economy when it slowed the last two years. The notes from the Federal Reserve’s most recent meeting, released on Wednesday, indicated that a growing number of the central bank’s board members were open to such measures.

“It’s hard for portfolio managers to get too negative because in the back of their head they know the Fed could come in at any time and change the game,” said Rick Bensignor, the chief market strategist at Merlin Securities.

The picture could change drastically if the European situation entered full crisis mode, and fears of this have escalated further than they did last year. The euro currency reached its lowest level in two years this week and was trading at $1.27 on Friday.

Greece is the leading problem, but if Greece leaves the euro currency there is widespread concern that Spain, with a much larger economy, would follow it. The cost of insuring Spanish debt rose to its highest level this week. Investors are watching the international summit meetings in Washington and Chicago this weekend, where European leaders could discuss measures to contain the problems.